Today’s headline is all about Moody’s upgrading Piaggio’s credit rating to “Ba3” – up from its previous “B1” rating.
I understand that financial credit rating systems aren’t exactly your typical fare on a motorcycle news site, so stay with me here for a minute.
The basic gist is that moving from a B1 rating to a Ba3 rating takes Piaggio beyond the threshold of being “highly speculative” investment opportunity to “non-investment grade” business in the eyes of investors.
According to the statement released by Moody’s analysts, “Piaggio’s upgrade recognises the improvements in the company’s profitability, the strengthening of its balance sheet and our expectation that its credit metrics will remain commensurate with the new rating over the next 18-24 months.”
“The rating upgrade reflects Moody’s expectation that Piaggio will continue to grow its top line and profitability over the next 12-18 months.”
This makes it a good new / bad news type of deal. The good news is that Piaggio has seen its credit rating increased, but bad news because their credit rating is still quite low.
For further clarification, Standard & Poor’s describes such a credit rating as the following: “an obligor is less vulnerable in the near term than other lower-rated obligors. However, it faces major ongoing uncertainties and exposure to adverse business, financial, or economic conditions which could lead to the obligor’s inadequate capacity to meet its financial commitments.”
To put things another way, Moody’s has estimated Piaggio’s credit worthiness to be on par with the Balkan country of Serbia.
In terms of real-world effects, Moody’s credit rating change does bode good news for the Piaggio Group, as it is likely to find it easier to borrow money, and do so at lower rates.
This should hopefully mean that it will be easier for Piaggio to expand its dealer lineup and support, develop new motorcycles and scooters, and invest in developing new technologies and products.
Obviously, the company still has a long way to go in those regards, but today’s news shows the very first steps down that path. So, there is that.
Source: Piaggio Group